Meet Stitch Fix, the Personal Shopping Service That Mixes Data With a Human Touch

If a service that mails recommended clothing and accessories to women isn’t up your alley, think about it this way: Stitch Fix is squarely at the intersection of both online and offline (so hot right now) and human and algorithm (even hotter).

For $20, San Francisco-based Stitch Fix sends its members five items that have been personally selected for them based on a size and style questionnaire, their Pinterest page and other feedback they provide to an in-house stylist.

They can apply the $20 toward buying the items, and ship the unwanted items back at no additional cost. And they can sign up for a monthly subscription, but don’t have to if they don’t want to.

Over the past two years Stitch Fix has registered 80,000 users, and it still has a three-week-long wait list. In March it shipped 10,000 “Fixes,” with an average purchase of $100.

That may be a relatively small business now, but it does seem effective. More than 80 percent of Fixes see one or more items purchased. And unlike nearly every other e-commerce business, there are no discounts.

“We belive so strongly in our recommendations that we put our money where our mouth is and send the product to you,” said CEO Katrina Lake in a recent interview, noting that the $20 styling fee doesn’t cover the cost of two-way shipping and personalization by an actual human.

While Lake said she might have imagined Stitch Fix would be a product for the fashion conscious (that’s the focus of some male-oriented competitors like TrunkClub), that doesn’t seem to be the case.

“Our customer is the harried mom or the working gal. She normally buys at J.Crew or Banana Republic on sale, or The Gap,” said Lake, who did blogger outreach at Polyvore and went to Harvard Business School before founding the company.

“We don’t do fast fashion, we don’t do the black and white cutout bodycon dress — we do a black-and-white blouse. It’s classic with a twist. We had a navy tulip print blouse that just flew,” she said.

The challenge of honing those recommendations as a way to evolve the shopping mall experience has attracted Netflix’s former VP of data science and engineering, Eric Colson, and Walmart.com’s former COO, Mike Smith, to the Stitch Fix executive team. They run analytics and operations, respectively.

Stitch Fix CEO Katrina Lake

It’s also bringing in a swarm of venture capitalists like Benchmark Capital’s Bill Gurley (he declined to comment) who’d like to invest in Stitch Fix, even though the company just raised a Series A round three months ago.

The balance between the algorithm and the human clicked early this year. “Sales are doubling every month and the customers are rabidly excited,” said early Stitch Fix investor Steve Anderson of Baseline Ventures.

Anderson added of Lake, “She was a beaten down soldier in the fall. She was like ‘What’s wrong with me?’ Now it’s the total opposite. I tell her, ‘Don’t spend time raising money because we have more important things to do.'”

(Lake, for her part, said it was an “open question” whether she would take the additional funding.)

Of course, Stitch Fix is no sure bet. I spoke with one investor who passed on a previous round and noted, “Starting a department store is expensive and logistically complicated. They’re under-appreciating how good you have to be at sales.”

So sure, Stitch Fix employs 42 people in San Francisco and just secured a 90,000 square foot fulfillment center in South San Francisco, and is in no way profitable. But the company today sells 90 percent of the inventory of the 150 styles it buys per month — at full price.

AllThingsD by Writer

AllThingsD.com is a Web site devoted to news, analysis and opinion on technology, the Internet and media. But it is different from other sites in this space. It is a fusion of different media styles, different topics, different formats and different sources. Read more »